General Servicing
Frequently Asked Questions

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Question 1 - If a mortgagor contacts the Collection Department and verbally offers a repayment plan of a payment plus, can we establish a short-term repayment plan based on this information?

Answer - The purpose of any repayment plan is to secure reinstatement of a delinquent mortgage. Therefore, any repayment plan should be based upon the most accurate information of the mortgagor's financial situation.

Question 2 - What are HUD's guidelines regarding phone calls in the first month of delinquency?

Answer - With the issuance of Mortgagee Letter 1998-18, dated April 2, 1998, HUD changed certain rules for the servicing of its insured mortgages in conjunction with the use of risk predictor models. The requirement to contact mortgagors by telephone between the 17th day of delinquency and the end of the month may be omitted at the mortgagee's discretion for assets considered low risk for foreclosure. A formal assessment of risk is required before a mortgagee can exercise this discretion. All mortgagors in default must be contacted by phone by the 45th day of delinquency.

Question 3 - Can a mortgagor acquire a FHA-insured mortgage while in a Chapter 13 bankruptcy?

Answer - HUD underwriting rules state that a person in Chapter 13 bankruptcy can purchase a home subject to a FHA-insured mortgage. Requirements are the applicant: must have completed one year of payments as required while under Chapter 13 and must obtain a letter from the Trustee of the court, stating the dollar amount the applicant can borrow. See HUD Handbook 4155.1.

Question 4 - What does direct conveyance mean?

Answer - Direct conveyance means the property is deeded directly to HUD in lieu of the mortgagee taking title in its name.

Question 5 - Is it necessary to re-send the HUD Occupancy letter following any failed Loss Mitigation option?

Answer - The mailing of a subsequent occupancy letter becomes necessary if a period of six months or more has lapsed since the initial one was mailed.

Question 6 - Are mortgagees required to send the HUD 426-H, "How to Avoid Foreclosure" pamphlet on assets that have been released or discharged from a Chapter 7 and/or Chapter 13 Bankruptcy?

Answer - Yes, see Mortgagee Letter 2000-05, page 5, item C, "Default Counseling" which states: At a minimum, the lender must provide the borrower with a copy of the HUD publication PA 426-H, May 19, 1997, "How to Avoid Foreclosure", no later than the end of the second month of delinquency (24 CFR 203.602).

Question 7 - What is an FHA Title I mortgage?

Answer - FHA Title I mortgages include mobile homes, prefabricated manufactured housing and home improvement loans.

Question 8 - Are lenders permitted to report to the Credit Bureau assets that are located within a Presidential Declared Disaster Area?

Answer - As per HUD Handbook 4330.1 Rev-5, Chapter 14, Paragraph 14-3D Suspension Of Reporting Delinquencies states "Mortgagees should temporarily suspend reporting delinquencies to credit bureaus if they are aware that the mortgagor's delinquency is attributable to hardships he or she incurred as the result of the disaster."

For additional information concerning assets located in a Presidential Declared Disaster Area, go to www.fema.gov .

Question 9 - Can a mortgagee proceed with foreclosure on a mortgage located on tribal lands?

Answer - No, a mortgagee cannot proceed with foreclosure on a mortgage that is located on tribal lands when the Section of the Act on the FHA Case Number ends with 248. For assets that are insured under Section of the Act 248, HUD will accept assignment of any Section 248 mortgage where the borrower has been in default more than 90 days. For assignment process, see HUD Handbook 4330.1 REV-5, Chapter 8.

Question 10 - Please clarify HUD's requirement to conduct a face-to-face meeting with a delinquent mortgagor. This is often impossible as many mortgagees maintain only one centralized servicing office.

Answer - HUD's regulation 24 CFR 203.604, Contact with the Mortgagor provides, "the mortgagee must have a face to face meeting with the mortgagor, or make a reasonable effort to arrange such a meeting, before three full monthly installments due on the mortgage are unpaid." The Department is aware that many lenders maintain "branch offices" that deal only with loan origination and some of these offices may only be staffed part-time. For the most part, individuals that staff an origination office are not familiar with servicing issues and are not trained in debt collection or HUD's Loss Mitigation Program.

The Department has always considered that the face-to-face meeting must be conducted by staff that is adequately trained to discuss the delinquency and the appropriate loss mitigation options with the mortgagor. Therefore, for the purpose of this discussion, the face-to-face meeting requirement referenced in 24 CFR 203.604 relates only to those mortgagors living within a 200-mile radius of a servicing office.